Retail sales in fresh plunge – and festive cheer hangs in the balance

Figures from the Scottish Retail Consortium showed the build-up to the festive season got off to a grim start in October as like-for-like sales dropped for the fifth consecutive month.

Although non-food sales were hit hardest, with clothing, footwear, furniture and homeware retailers all suffering, food sales were also not immune to the effects of weak consumer confidence, which is even lower north of the Border than for the UK as a whole.

Like-for-like food sales tumbled 1.4 per cent despite heavy promotional activity from the supermarket chains while non-food sales were down 1.6 per cent, signalling tough times ahead for all retailers, who rely on the festive season to contribute a large proportion of their annual revenues.

David McCorquodale, head of retail in Scotland at KPMG, said: “The success of the Christmas season for retailers hangs in the balance as October’s results do not set a strong foundation.”

Like-for-like figures compare sales with the same month a year earlier but strip out the effect of any spending in stores that opened or closed during the intervening 12-month period.

Total sales were also down 0.1 per cent in October. Total food sales grew by just 0.7 per cent – the slowest rate since April 2004.

Ian Shearer, director of the SRC, used the bleak numbers to renew calls for the Scottish Government to drop its so-called “health levy” on supermarkets.

“Retailers are still hoping for some festive magic but these gloomy figures are not a good start to the Christmas build-up,” he said. “Non-food retailing continues to struggle, but food sales have been hit too.”

“These figures should tell the Scottish Government that retailers cannot be regarded as an invulnerable cash cow. It should not add the 5.6 per cent inflation increase to business rates bills next April. No-one is seeing sales or profits rise on that scale. And it cannot expect to impose a supermarket tax without effect, when it would increase the rates of affected stores by a further 22 per cent.”

The SRC says Scottish households are more concerned about job stability and personal finances, leading to faster declines in consumer confidence than elsewhere in the UK..As a result, Scottish retailers have been forced to shoulder a poorer sales performance for most of this year compared to the UK as a whole.

Despite the gloomy SRC figures, Britain’s second-biggest supermarket chain Asda yesterday reported a rise in third-quarter sales growth, helped by its revamped own-brand food ranges and a pledge to be cheaper than rivals.

Sales at stores open more than a year rose 1.3 per cent, excluding fuel and VAT sales tax, in the three months to September.